Friday, 7 October 2016

Average mortgage size hits new high

Mortgages up 8 per cent

Australia's largest mortgage aggregator Australian Finance Group (AFG) reported in its Mortgage Index that year-on-year total quarterly mortgage volumes increased by +8 per cent to a record $15.19 billion. The index is not seasonally adjusted.

Since the standard variable home loan rate fell below 7 per cent in Australia in the September 2012 quarter, the average mortgage size has increased by +$90,000 or +23 per cent.

Investor market share ticked back to 32 per cent in the quarter - well down from the 2015 peak of 40 per cent - in part due to more restrictive lending criteria, combined with widespread fears of an apartment oversupply.

According to AFG the lift in mortgage volumes was largely driven by homeowners looking to save, with refinancers accounting for 38 per cent of activity, up from 36 per cent in the prior year comparative quarter. AFG noted that home loans are widely available from below 4 per cent.

State versus state

At the state level the average mortgage size hit new highs in New South Wales ($597,656) and Queensland ($400,566). South Australia also notched a fresh high average mortgage size of $379,405. Elsewhere average mortgage sizes were either at or below previous peaks.

Quarterly mortgage lodgement volumes hit record highs in each of the three most populous states plus South Australia, offset by declines in Western Australia and the Northern Territory.

Victoria continues to defy gloomy predictions with heady levels of buyer activity, while Queensland also recorded an very large year-on-year uplift, even after accounting for possible shifts in AFG's market share.

The wrap

The AFG figures are always well worth a read given their materiality.

The headline result was very strong, but it does need to be recognised that a significant volume of mortgage finance presently relates to refinancing in the prevailing low interest rate environment.

These data suggest to me that interstate buyers are likely to see better results in Queensland than elsewhere, at least initially (for the right property type, at any rate, which does not mean high-rise apartments). The economy of Western Australia remains in recession, and as a result Perth may not come on to he radar of interstate buyers until 2018.